The new IRS 'digital first' tax collection initiative could be trouble if you're behind on your taxes

Photo (c) Michail Petrov - Getty Images

Contacting the IRS and working out things could be the best first step

Welcome to May – Cinco de Mayo, Mother’s Day, Memorial Day… and now (albeit unofficially) Back Taxes Month. The Internal Revenue Service (IRS) is flexing its muscles for the first time in trying to become a more cost-effective, more efficient agency by becoming a “digital first” tax collector. 

One of the key elements of that plan is to snare elusive tax evaders who owe more than $7 trillion in unpaid taxes – a plan that may be good for the IRS, but one that can strike fear in the hearts of delinquent taxpayers. 

Separating the good from the questionable

There are plenty of companies that offer tax relief. Amy Hebert, a consumer education specialist with the Federal Trade Commission (FTC) says some pitches promise that they’ll apply for IRS hardship programs on your behalf — if you pay them first. Hebert says a huge upfront fee is a red flag.

“Don't do business with anyone that tells you to pay their whole fee upfront. If they say that, walk away,” Hebert said, emphasizing that one simple request should be a hard “no” for any consumer.

“The truth is that most taxpayers are unlikely to qualify for the programs these scammers advertise. In many cases, these companies don't settle your tax debt. Some don't even send your paperwork to the IRS to apply for programs to help you,” Hebert said. 

Another warning signal is if a company charges pricey monthly “maintenance fees.” Maintenance fees by themselves aren’t necessarily a problem, but if a company says that they’ll resolve the matter quickly and that the customer will only pay the fee for just a few months, the customer needs to ask what those fees will total and get it writing because those fees can add up quickly.  

What should delinquent taxpayers do?

If someone owes back taxes, it may be to their advantage to contact the IRS before the IRS contacts them. At a minimum, that shows there’s a genuine interest in resolving the issue. One ConsumerAffairs reviewer found dealing with the IRS far from frightening.

“I spoke with an IRS representative on the phone. They are easy to talk with (and) very polite,  Larry from Crystal Lake, Ill., wrote in a ConsumerAffairs review.

Larry found that the IRS doesn’t negotiate back taxes, but the agency will try to find a win-win of some sort.

“I did get a one-year abatement on penalties from the agent over the phone. Call them first to work out a plan,” he said.

Hebert dittoes the IRS’ willingness to play fair and work out a payment plan directly with the IRS for federal taxes or a person’s state comptroller for state taxes. 

If you would rather not deal directly with the IRS, there are plenty of legitimate companies that can help. ConsumerAffairs recently considered 21 tax relief companies before selecting seven as “authorized partners.” Interested consumers can read more about the process as well as verified reviews of those companies here.

Take a Financial Relief Quiz. Get matched with an Authorized Partner.